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Effects of downsizing policies on IS survivors' attitude and career

management

Abstract
The effects of downsizing strategies on surviving system personnel have received scant
attention in the IS literature. This paper reports a study of IS survivors, the employment practices
of the organizations, the attitudes of the survivors toward downsizing, and the career
management practices of the survivors. The results indicate that the downsizing practice has a
strong relationship with survivor attitudes and the practices survivors use in managing their
careers. Specifically, indirect downsizing methods tend to avoid negative attitudes and promote
career management strategies more beneficial to the organization

Keywords: Information systems personnel; Career management; Downsizing survivors;


Employee assistance.

1. Introduction
Driven by top management interest in cost reduction, information system (IS) downsizing
the deliberate organizational decision to reduce workforce size is one of the most significant
phenomena in IS resources management in the 1990s. Firms downsizing there is departments
report significant budget reduction and other benefits [6,39,66,71]. Despite growing top
management interest, little is known about the impact of the IS downsizing policies and its
process implementation on IS survivors. From a practical perspective, as the downsizing process
shifts from consideration of organizational level issues toward the individual affected by the
process (survivors), efforts to manage the transition through intervention and to alleviate the
impact on personnel come into focus. Downsizing strategies refer to the methods employed to
accomplish a workforce reduction. Means have included early retirement, attrition without
replacement, outplacement, and layoffs. These approaches differ in their speed of achieving the
goal of workforce reduction, the degree to which the organization retains control, and the
negative effects on employees [46]. Once the downsizing strategy has been identified, the
process must be implemented and managed. Key issues concern the reduction of uncertainty
through extensive communication and the implementation of interventions designed to aid and
support both terminated personnel and survivors. The goal is to help both terminated employees
and survivors accept the process and prepare for new roles. Although much literature on
downsizing has been written over the last decade, technical professionals including IS personnel
are generally overlooked. Existing studies are limited to determination of downsizing success in
the IS department [67] and factors in perceived success [68]. Apparently, none has investigated
the impact on the attitudes and future career strategies of the survivors of an IS downsizing,
though it has been done in other fields. What are the IS survivors' attitudes toward downsizing
and how do they affect survivors' career management strategies in the downsized workplace?
Are these attitudes and strategies altered by the organizational downsizing strategy and
intervention processes? These are important questions, as a key element of success is that
downsizing is perceived positively by the employees as a purposeful organizational response to
achieve its objectives [13,38,45,51,64].
2. Downsizing background
Given the many negative effects of downsizing and their implications for organizations, a
substantial literature has developed. It addresses various aspects of the downsizing process. The
literature is predominately experience based. It is descriptive of the normative mechanisms that
organizations have used to downsize, and it is prescriptive as to how reductions should be
accomplished [52,59]. From a conceptual perspective, the relevant components of the
downsizing process include target identification, strategy selection, and management of
transition through intervention. Targets refer to the segments of the organization that will absorb
downsizing. Strategies represent the specific mechanisms used to operationalize the reduction.
Intervention management involves implementing policies, such as psychological counseling and
vocational training to assist individuals who are affected by the downsizing process. These items
combine to form the organizational downsizing policies. Greenhalgh et al. [31] proposed that the
various downsizing strategies could be arranged into two major categories that reflect the trade-
offs between maintaining employee well-being and maximizing short-term cost savings for the
organization. Under indirect redeployment or layoffs, employees are encouraged to comply
voluntarily; e.g., by transfers to different jobs or locations. Senior employees may be offered
incentives to facilitate early retirement decisions. But, the most drastic method of downsizing is
reduction without any assistance, termed direct redeployment or layoffs. Often, employees are
offered assistance in adjusting to the termination [54] which may include outplacement or
continuation of benefits. Observers have noted that a focus on short-term economic criteria often
entails hidden costs for the organization; these are rarely considered within the context of
downsizing strategy selection [35]; e.g., severe strategies may have unintended effects on
survivors, including poor morale, lack of commitment, increased stress, and turnover [36].
Recent research indicates that the approach chosen may have an impact on the atmospheres
within an organization [14]. Models that address intervention generally indicate two primary
goals of the process [2,16]. The first is to provide support for the personnel most directly affected
by downsizing: displaced personnel. The second concerns survivors. The organization needs to
regain the confidence, trust, and commitment of its employees, and rebuild a positive image.
Specific interventions include open communication between the organization and individuals,
financial support, career planning/counseling, resume development, on-going training, and
interview training. It is believed that the provision of these interventions will help improve the
transition [8,23,32,40]. The effects of downsizing on terminated employees that have been
examined include: (1) financial loss [61]; (2) impacts on well-being, including psychological
health [4,24], cognitive functioning [3], and anxiety and depression [5]; (3) attitudes, including
self-satisfaction [63], self-esteem [55], satisfaction with their lives, marriages and families [18],
and social isolation [53] and (4) family relationships, including standard of living [57], spouse's
psychological well-being [49], financial arguments [70], and stress on children and friends [1].
On the other hand, the studied effects of downsizing on survivors include productivity,
organizational commitment, attitudes towards coworkers [10], perceived job-security [12] and
perceived job content [15]. However, technical professionals have received little attention in
these studies. Furthermore, career management strategies are overlooked [38].

3. Research model
Downsizing decisions begin at the organizational level with a focus on the organizational
environment (Fig. 1). The relevant environmental features, such as economic conditions,
competitor actions, and market demand are objective in nature [69]. The detection of
environmental change and its meaning are internal phenomena; variation in detection and
interpretation across organizations is anticipated [25]. Some firms may anticipate the antecedents
of change in advance of more normative detection, whereas others may lag well after others in
the industry have attended to significant change. Thus, detected environmental antecedents are
regarded as perceived conditions that provoke refinements of existing business strategy or its
redefinition, such as downsizing. The framework (Fig. 1) shows that the degree of articulation of
the downsizing decision is influenced by characteristics of the organization. Characteristics such
as strategic leadership, HRM sophistication, and cultural values enable or support the proactive
downsizing decision processes. In their absence, decisions are more likely to be reactive in
nature [43,60]. Target and strategy selection determine the first impacts at the individual level,
namely the terminated personnel, the survivors, and the programs designed to assist both groups.
These form the organizational downsizing policies. The framework further indicates that the
relationship between downsizing strategies and effectiveness at the organizational level is
mediated by complex psychological processes at individual levels of conceptualization. The
configuration of downsizing targets and strategies, their sequence over time, and the nature of
their implementation, not only serve to create categories of `survivors' and `terminated
personnel,' but also affect their perceptions, interpretations, and reactions. Positive attitudes
toward downsizing view downsizing as a long term process that incorporates a variety of
strategies [37,42,58], is linked to long term strategic objectives [30,33,48], preserves distinctive
and critical competencies and is carefully monitored through human resource management
interventions [27,50]. In contrast, negative downsizing attitudes view downsizing decisions as
poorly articulated with respect to these criteria. The time-frame is compressed, criteria are
simplistic, strategic competencies are not considered, and the process is unmanaged [41].
However, from a purely instrumental perspective, the ways in which an organization supports
downsized personnel and the effects of job loss on displaced employees are meaningful
information to downsizing survivors. Survivor reactions of fear, rigidity, loss of commitment,
loss of motivation, and failure to innovate may occur at the very time when the organization is
most in need of employee support. Career management strategy is a reaction that can be either
detrimental or beneficial. Survivor reactions influence group and organizational effectiveness.
Collective responses affect the firm's adaptation to (perceived) environmental contingencies. The
effects of downsizing unfold over time.

4. Hypotheses
The purpose of this study was to examine the relationship of downsizing policies to IS survivors'
attitude toward downsizing and their career management strategies. The relationships in the
framework would indicate that attitudes and career strategies could be managed by
organizational practices. The following hypotheses were tested:
H1a: IS survivors' attitude toward downsizing is related to organizational downsizing strategy.
H2a: IS survivors' attitude toward downsizing is related to organizational intervention programs.
Other research indicates that strategies used to accomplish downsizing will in¯uence the
behaviors and attitudes of those who survive [7,10,29]. Research also indicates that survivors can
react positively or negatively to the layoffs depending on the perceived fairness of the
organizational policies [9,11]. As an example, Atari's survivors showed decreased morale and
strong intentions to leave the organization due to the callous manner in which employees were
laid off [65]. Survivors of downsizing may need counseling to cope with feelings of guilt [28]
and to adjust to additional job responsibilities [20]. They may need to be retrained to take on
additional responsibilities or to fill new positions within the organization [62]. In addition,
Brockner and Greenberg argue that survivors examine whether the laid-off employees are treated
fairly. Another factor is the career management strategy taken by survivors. Those working to
improve their chance of success within the organization are more likely to provide benefit than
those posturing to remain employable outside the organization. Thus, we need to explore the link
of the model relating intervention and downsizing strategy to career management strategy. We,
therefore, propose the following hypothesis:
H3a: IS survivors' career management strategy is significantly related to organizational
downsizing strategy.
H4a: IS survivors' career management strategy is significantly related to organizational
intervention programs.
Some studies have shown that an organization taking severe immediate personnel cut-backs to
reduce workforce often dramatically reduce employees' trust and organizational commitment
[17,21,26]. Researchers argue that intervention efforts indicate to survivors that the organization
cares about its employees and helps to maintain the morale and productivity of those remaining
[56]. When an organization chooses to do nothing to help dismissed employees, a negative signal
is sent to survivors. However, extra training and downsizing awareness associated with
intervention should lead to increased external career management activities due to enhanced
qualifications and the desire to be prepared for future organizational downsizing actions. The
psychological success cycle of careers [34] suggests that individuals who set and achieve goals
in a supportive context will have higher satisfaction and higher career goals within an
organization.
5. Methodology
5.1. Sample
Questionnaires were mailed out to 300 AITP (Association of Information Technology
Professionals) members in the Midwest of the USA. The sample was chosen because members
of AITP represent a wide variety of managerial positions and organizational settings and has
been widely used in research situations. Self-addressed return envelopes for each questionnaire
were enclosed. All the respondents were assured that their responses would be kept confidential.
A total of 85 questionnaires were returned for a response rate of 28%, which appears to be
consistent with other mail surveys. Five questionnaires were eliminated due to missing data. As a
results, 81 questionnaires were used in the data analysis. A summary of the demographic
characteristics of the sample are presented in Table 1.

5.2. Questionnaire
The questionnaire was developed from a survey instrument by Byer [19]. The validation of the
attitude measures toward downsizing can be found in that source. Intervention, downsizing
methods, and employee career management strategies are quantified and based on best
recollection of the subjects. The questionnaires were critically reviewed by two management
researchers for further content validity. Ambiguities in the instructions were corrected.
Instructions requested subjects to indicate how strongly they agree with the attitude statements
and how often they use the career management strategies in a downsizing workplace. The
attitude instrument contained 10 items. The attitudes are survivor perception of downsizing as an
organizational practice. As can be seen by the items in Table 2, viewpoints on downsizing (e.g. a
strategy for continuous improvement) are sought rather than attitudes toward the organization.
The intent is to examine attitudes toward downsizing and not job satisfaction measures.

Table 1
Demographic information
Gender
Male 61 (75%)
Female 20 (25%)
Age
<40 17 (21%)
_40 and <50 36 (44%)
>50 28 (35%)
Marital status
Married 65 (80%)
Single/separated 16 (20%)
Having children living at home
Yes 42 (51%)
No 39 (48%)
Industry
Manufacturing 23 (28%)
Private service (e.g. finance, insurance) 30 (37%)
Wholesale/retail 6 ( 8%)
Public administration 5 (6%)
Others 17 (21%)
Company size
<100 employees 6 (7%)
_100 and <500 employees 23 (28%)
_500 and <1000 employees 12 (15%)
_1000 and <2500 employees 13 (16%)
>2500 employees 27 (33%)
How long have been employed in this industry?
Less than 5 years 4 (5%)
_5 and <10 years 7 (9%)
_10 and <20 years 31 (38%)
_20 years 39 (48%)
Education
High school/associate degree 11 (16%)
Bachelor 24 (34%)
Graduate (Master's or J.D.) 15 (21%)
Ph.D. or equivalent 20 (29%)

Table 2
Attitude toward downsizing items. Please consider each of the following statements, representing
viewpoints occasionally expressed regarding downsizing, and indicate the degree to which you
agree or disagree
a1. Downsizing is an unrealistic demand
a2. Downsizing is an opportunity for on-going improvement
a3. Downsizing is an approach to maintain efficient organizations
a4. Downsizing is a target or goal to be achieved
a5. Downsizing is a strategy for continuous progress
a6. Downsizing is a method to a achieve a more competitive position
a7. Downsizing is a constraint or obstacle to be overcome
a8. Downsizing is a continuous activity to eliminate organizational fat
a9. Downsizing is every employee's responsibility
a10. Downsizing is a reaction to economic pressure
Reply scale
1. Strongly disagree
2. Moderately disagree
3. Slightly disagree
4. Neutral
5. Slightly agree
6. Moderately agree
7. Strongly agree

The scale required further reduction and verification before the research questions could
be tested. First, principle components analysis was conducted. The analysis for attitude scale
produced only one component. The first nine items loaded into the factor after varimax rotation;
item a10 was eliminated from further analysis. The homogeneity of the items within the
identified factor was established further by computing its internal consistency reliability
coefficient (a.0.93) applying the formula recommended by Cliff [22]. Kaiser's measure of
sampling adequacy [44] was conducted and the results (MSA.0.82) indicated the adequacy of the
sample size. A mean attitude score was created for each respondent. (Note: items 1 and 7 were
reverse statements). Table 3 shows the items used to measure career strategy. Statements are
replicated from the survey. The scale was a 7 point scale with 1 Ð not used at all, 4 Ð used to a
slight extent, and 7 Ð used almost exclusively. A principle components analysis for career
strategy items produced two components with eigenvalues greater than chance [47]. The factor
loadings of a subsequent factor analysis using varimax rotation and the assignment of items to
each of the two scales are also shown. Kaiser's measures of sample adequacy for both approaches
were 0.80. The alpha values for both were 0.68. Two mean scores were computed for each
respondent, corresponding to the two factors: internal- and external-oriented career management.
Item c7 did not load uniquely into either factor. The first factor can be considered an `internal
oriented' career approach including forming political alliances, developing critical skills tied to
the organization's new thrust, and avoiding long-term or group assignments where contributions
cannot be clearly defined. This factor contains items generally favorable to the organization.
Certainly, building skills that are advantageous to the organization is a major plus.
Likewise, political contacts within the company are often important to the success of the systems
group, and ultimately the success of systems important to the company. The third item is more of
a route to avoid appearing unproductive by avoiding dangerous projects. It is advantageous only
if the organization has effective evaluation and reward structures in place to encourage
participation in such activities. The second factor can be considered an `external oriented'
approach including maintaining mobility, becoming an IS generalist, and returning calls from
executive recruiters. The harmful effects to the organization are evident. These career strategies
are aimed at finding a job in another organization. This strategy views the organization as a
temporary arena, where skills are viewed as a path to a better place, and interactions with
headhunters are sought. Three scales remain. These include intervention methods, direct-layoff
methods, and indirect-layoff approaches and the items are shown in Tables 4 and 5. Statements
in the table are abbreviated and may be found in their complete form in Byer's article. The
intervention scale items on the questionnaire were examined using principle components analysis
and found to have only one identifiable component. Subsequent varimax rotation found all
loaded into the single factor. The three scales of intervention methods, direct-layoff methods, and
indirect-layoff approaches had Kaiser MSA values of 0.89, 0.75, and 0.71, respectively and
alpha values of 93, 0.63, and 0.75.
While these scales could benefit from further development, they are based extensively on the
literature.

Table 3
Factor analysis results of career management items. Please indicate the practices that you
adopted for managing your career in a downsizing workplace
Factor 1 Factor 2
c1. Forming political alliances: do anything you find morally acceptable to be noticed in a
positive way by key people 0.710 0.111
c2. Develop and market critical skills: develop skills that are closely tied to the organization's
new thrust 0.680 0.246
c3. Maintain your mobility: see the company as a temporary arena in which to apply your skills
and knowledge.
Be loyal primarily to yourself and to place your own interests above those of the organization
0.001 0.866
c4. Avoid long-term or group system project where your accomplishments cannot be clearly
defined: strive for some individual problem-solving assignments and avoid attempting to solve
the unsolvable 0.813 0.067
c5. Become an IS generalists rather than a specialist: over specialization can hinder movement
from one corporation to another; however, that a delicate balance must be achieved 0.150 0.535
c6. Return calls from executive recruiters, thus maintaining your marketability: not returning
calls is a tip-off that you are not willing to test the waters 0.324 0.724
c7. Cultivate networks that enhance your visibility outside your organization: participation in IS
professional organizations and community activities makes you visible as a competent IS
manager or professional 0.430 0.428
Response scale
1. Not used at all
2. Used to a very slight extent
3. Used to a slight extent
4. Used to a moderate extent
5. Used to a great extent
6. Used to a very great extent
7. Used almost exclusively
Table 4
Intervention items. Please consider each of the following alternatives, often utilized during
downsizing programs, and indicate the extent to which each alternative has been used in your IS
organization for the transition
Abbreviated statements
I1. Ensure equal amount of attention
I2. Ensure job security
I3. Outplacement
I4. On-going training to survivors
I5. Consulting to layoffs
I6. Develop and cross-training of employees
I7. Redesigned compensation system
I8. Severance packages to layoffs
I9. Personal coaching to survivors
I10. Career counseling to layoffs
I11. Information sharing to survivors
I12. Made the cuts all at once
I13. Open communication
I14. Task redesign for survivors
I15. Top management honest with employees
Response scale
1. Not used at all
2. Used to a very slight extent
3. Used to a slight extent
4. Used to a moderate extent
5. Used to a great extent
6. Used to a very great extent
7. Used almost exclusively

Table 5
Direct-layoff and indirect-layoff items. Please consider each of the following elements,
frequently utilized in downsizing programs, and indicate the extent to which each element was
used by your organization
Indirect-layoff
a. Early retirements
b. Transferred employees to new jobs within the company
c. Eliminated and/or reduced overtime
d. Retraining for different jobs within the same organization
Direct-layoff
a. Outplacements outside the company
b. Involuntary layoffs
Response scale
1. Not used at all
2. Used to a very slight extent
3. Used to a slight extent
4. Used to a moderate extent
5. Used to a great extent
6. Used to a very great extent
7. Used almost exclusively

6. Results
Prior to start of testing the hypotheses, the demographic data was examined for potential
influence. Each demographic measure was set up as an independent variable in separate
MANOVAs with the six scales as the dependent variables. Not one of the demographic variables
was found to have a significant relationship to the scales. Thus, the sample's demographic
character does not confound the results of the analysis.
6.1. Attitude
In order to test the first two hypotheses, a three-way ANOVA was conducted. Each of the
independent variable scales was reduced to two dimensions (high and low) by dividing the
sample at the median. Table 6 shows the results of the analysis. The top portion of the table
shows the significance levels of the factors in the ANOVA. Only the direct layoff approaches,
the interventions, and the three-way interaction of the independent variables are significantly
related to the attitude scale. This supports hypotheses H1a and H2a. The middle portion shows
the attitude means for high and low categories of the two significant factors. An examination
reveals that subjects in organizations using the higher extent of direct-layoff methods expressed a
significantly more negative attitude toward downsizing than subjects in organizations using less
extent of direct-layoff method for downsizing (3.90 versus 4.10). Subjects in organizations
implementing a higher extent of intervention programs expressed a more positive attitude toward
downsizing than subjects in organizations implementing a lower extent of assistance programs
(4.39 versus 3.54). The means in the three-way analysis exhibit the same influence. In summary,
the results show that survivors' attitude were strongly affected by the degree of use of the direct-
layoff method to reduce workforce and the degree of assistance programs implemented by an
organization.

Table 6 ANOVA for IS survivors' attitude


Independent variables F-value P-value
Indirect-layoff 1.32 0.25
Direct-layoff 3.96 0.05*
Intervention 5.70 0.02*
Indirect_direct 3.45 0.06
Indirect_intervention 0.68 0.41
Direct_intervention 1.23 0.27
Indirect_direct_intervention 3.85 0.05*
`Attitude' means analysis
Significant main effects Low High
Direct-layoff 4.10 3.90
Intervention 3.54 4.39
Three-way Direct low Direct high
Intervention high Ð Indirect high 3.90 4.78
Intervention high Ð Indirect low 4.46 3.03
Intervention low Ð Indirect high 3.86 2.89
Intervention low Ð Indirect low 3.72 2.82
* Significant at 0.05.
Table 7
ANOVA for internal-oriented career approach
Independent variables F-value P-value
Indirect-layoff 3.79 0.05*
Direct-layoff 5.93 0.01*
Intervention 0.58 0.44
Indirect_direct 0.11 0.74
Indirect_intervention 2.33 0.13
Direct_intervention 0.26 0.61
Indirect_direct_intervention 0.03 0.87
`Internal career' means analysis
Significant main effects Low High
Direct-layoff 3.33 4.38
Indirect-layoff 3.29 4.20
* Significant at 0.05

6.2. Career strategy


In order to test hypotheses three and four, a three-way ANOVA was conducted. For the internal-
oriented career management strategy (see Table 7), only two main effects, direct-layoff and
indirect-layoff are significant. The subjects in the organizations using a high extent of direct-
layoff expressed a higher extent use of internal-oriented career strategies than subjects in
organizations with low extent use of direct-layoff (4.38 versus 3.33). Similarly, subjects in
organizations using a high extent of indirect-layoff exhibited a significantly higher use of
internal-oriented strategies than subjects in organizations with a lower use (4.20 versus 3.29). IS
survivors' internal-oriented career management strategy in a downsized workplace is only highly
dependent on the extent of downsizing. The higher extent the downsizing taken by an
organization, the more active an individual will be to form political alliances and try to tie their
skills to the organization's needs. Intervention programs, however, did not have the mitigating
effect on the pursuit of career management strategies. The IS employees could as easily use the
new skills to pad their resumes as to look for other opportunities within the organization. Table 8
shows the results of a three-way ANOVA for external-oriented career strategies. There are two
significant main effects, direct-layoff and assistance programs, and a significant three-way
interaction. The results suggest that subjects in organizations using a higher extent of direct-
layoff method expressed a higher extent use of external-oriented career management strategies
than subjects in organization using a lower extent of direct-layoff. No significant relation was
found with the indirect layoff approaches indicating that a better posture with the organization is
obtained than with direct methods. In addition, IS survivors in organizations which implement a
higher extent of assistance programs indicated a higher extent of use of external-oriented career
strategies than subjects in organizations which implement a lower extent of assistance programs
to their employees. Thus, the support exists for both H3a and H4a.

Table 8
ANOVA for external-oriented career approach
Independent variables F-value P-value
Indirect-layoff 0.44 0.51
Direct-layoff 11.63 0.00*
Intervention 6.01 0.01*
Indirect_direct 0.53 0.47
Indirect_intervention 2.05 0.16
Direct_intervention 0.60 0.44
Indirect_direct_intervention 7.26 0.01*
`External career' means analysis
Significant main effects Low High
Direct-layoff 3.01 4.15
Intervention 2.99 3.92
Three-way Direct low Direct high
Intervention high Ð indirect high 3.50 4.27
Intervention high Ð indirect low 3.08 5.22
Intervention low Ð Indirect high 2.48 4.58
Intervention low Ð Indirect low 2.94 2.67
* Significant at 0.05.

7. Conclusions
The explicit test in this paper is that the downsizing process that proceeds from
organizational level considerations has individual level impacts. The results provide managers
with insights into how to administer layoffs so as to elicit from survivors the most positive (or
least negative) behavioral and attitudinal reactions. Downsizing efforts are often poorly planned
and ineffective for organizations which are forced into crisis situations which necessitate
immediate personnel cut-backs to generate savings. On the other hand, organizations
incorporating a variety of downsizing strategies linked to long-range strategic objectives
preserve distinctive and critical competencies. Fairness perception is also important to the
survivors, as reflected in the indirect methods encouraging internal career strategies. Employees
are more likely to judge a downsizing as justified when: (1) workers received adequate advanced
notice, (2) employees are treated with dignity and respect during the downsizing, (3)
management must provide a clear, adequate explanation of the reasons for the layoffs, where
taking the time to do so (`sweating the details') and the reasons themselves both count; and (4)
employees are involved in layoff decisions. This latter has two benefits. The employees may
create workable alternatives to layoffs and they judge layoffs as more justified when they are
involved in decisions.